Legal

Asset Protection for Your Heirs

By Libby Banks, The Law Office of Libby Banks, PLLC

Iam often asked whether the revocable living trust we use as the cornerstone of our estate plans provides asset protection––protection from the creditors of the person creating the trust. The answer is no. While the revocable trust is a great estate planning and probate avoidance tool, it is not an asset protection trust. When you create this trust, you still have full control over the assets in the trust. Because of this, the law recognizes that they are your assets, and your creditors can get to them in the same way as if they were in your personal name and not in your trust.

PROTECTIVE TRUSTS CAN PROTECT THE INHERITANCE IN CASE OF YOUR BENEFICIARY’S SPOUSE, AND DIVORCE OR DEATH

Many of my clients like the idea of the benefi ciary protective trust, especially after I mention that the trust can protect a benefi ciary’s inheritance from his or her spouse. If a benefi ciary has a marriage that’s a bit rocky will the inheritance end up in part in the ex-spouse’s name?

Leaving the inheritance in trust can assure that your benefi ciary keeps the inheritance in a divorce. The assets held in trust won’t be divided up, because the inherited trust is separate property, belonging only to the benefi ciary and not his or her spouse.

However, you can help your benefi ciaries out by protecting their inheritance with a benefi ciary asset protection trust. How do we do that? Instead of your trust saying that your benefi ciaries get their inheritance outright (meaning the trustee simply writes them a check and they do with it what they want), your trust can direct that each benefi ciary receives his or her share in a protective trust.

PROTECTIVE TRUSTS CAN KEEP AN INHERITANCE OUT OF THE HANDS OF CREDITORS

These benefi ciary trusts do provide asset protection for the trust assets. An outright gift of the inheritance can result in a benefi ciary’s creditors snatching all your hard-earned money. But when you leave the assets in a protective trust, your benefi ciary will not lose his or her inheritance to bankruptcy or other creditor issues. And what happens to the inheritance if your benefi ciary dies after receiving it? With the protective trust, we can direct them to the benefi ciary’s children or grandchildren. If your benefi ciary puts the inheritance in joint ownership with his or her spouse, what happens when your benefi ciary passes away? If their spouse remarries, there is a real possibility that the assets may go to the new spouse and not to your benefi ciary’s children. Providing that the inheritance is to be held in a trust for your child, and then passes on to your grandchildren, can help prevent this unfortunate scenario.

If you’d like to discuss asset protection planning for your heirs – or if you are interested in the revocable living trust for your estate planning, visit my website at libbybanks.com or call 602-375-6752 for a free initial consultation.

Call us today to schedule your FREE Estate Planning Consultation

Our Estate Planning in Phoenix and Scottsdale is highly customized to meet your unique family situation, assets, values, and personal goals. Our complimentary first meeting allows you to get to know Libby, our Estate Planning attorney and talk about your unique situation and what plan will best fit your needs.

Remember, when you choose Libby you are not only hiring someone to prepare your Estate Plan, you are choosing a seasoned Estate Planning attorney to guide you through this often complex process and raise questions you might not have considered. You are choosing an experienced professional to create a plan that serves your family in the way that you want and, after you are gone, a trusted advisor that your loved ones can depend on.

Come see us in our new, convenient office located just down the street at 5010 E. Shea Blvd, Suite 205 Scottsdale, AZ 85254 602.375.6752 | www.libbybanks.com | libby@libbybanks.com

Kelly Ross, Agent 7704 E Doubletree Ranch Rd, Ste 150 Scottsdale, AZ 85258 Bus: 480-841-9000 www.insuringthevalley.com

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